A-88466, SEPTEMBER 15, 1937, 17 COMP. GEN. 253

A-88466: Sep 15, 1937

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THE JUDGE ADVOCATE GENERAL OF THE NAVY IS CORRECT IN THE CONCLUSION REACHED BY HIM IN AN OPINION OF AUGUST 14. THAT IT IS SUFFICIENT COMPLIANCE WITH THE LAW FOR FUEL OIL TO HAVE BEEN PROCESSED OR MANUFACTURED IN THE UNITED STATES. EVEN THOUGH THE CRUDE OIL MAY HAVE BEEN IMPORTED FROM A FOREIGN COUNTRY. UNDER THE GENERAL RULE THAT WHERE A SPECIFIC STATUTE IS APPLICABLE THERE MAY NOT BE APPLIED THE TERMS OF A GENERAL STATUTE. THERE IS NOT FOR APPLICATION THE MORE GENERAL TERMS OF THE BUY AMERICAN ACT OF MARCH 3. THE ABOVE -QUOTED TERMS OF THE ANNUAL APPROPRIATION ACTS ARE UNLIKE THE BUY AMERICAN ACT OF MARCH 3. THIS APPARENTLY FOR THE REASON THAT IT WAS WELL KNOWN THE UNITED STATES HAD LARGE QUANTITIES OF CRUDE OIL FROM WHICH GASOLINE AND FUEL OIL COULD BE MANUFACTURED.

A-88466, SEPTEMBER 15, 1937, 17 COMP. GEN. 253

CONTRACTS - FOREIGN PRODUCTS - FUEL OIL - NAVY DEPARTMENT APPROPRIATION LIMITATIONS THE PROVISIONS OF THE ACTS OF JUNE 3, 1936, 49 STAT. 1410, AND APRIL 27, 1937, 50 STAT. 108, AGAINST PURCHASE BY THE NAVY DEPARTMENT, FOR SPECIFIED PURPOSES, OF "ANY KIND OF FUEL OIL OF FOREIGN PRODUCTION," PROHIBIT THE PURCHASE OF FUEL OIL PROCESSED OR REFINED FROM CRUDE OIL OBTAINED FROM WELLS OUTSIDE THE UNITED STATES OR ITS POSSESSIONS--- THE WORD "PRODUCTION" HAVING REFERENCE TO THE TAKING OF THE CRUDE PETROLEUM FROM THE LAND AS WELL AS THE PROCESS OF REFINEMENT OR LATER MANUFACTURE INTO FUEL OIL, ETC. DECISIONS CONSTRUING THE BUY AMERICAN ACT OF MARCH 3, 1933, 47 STAT. 1520, 1521, DISTINGUISHED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE NAVY, SEPTEMBER 15, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF AUGUST 17, 1937, REQUESTING DECISION WHETHER UNDER THE ACT OF JUNE 3, 1936 (49 STAT. 1398), AND PUBLIC, NO. 54, SEVENTY-FIFTH CONGRESS, APPROVED APRIL 27, 1937 (50 STAT. 96), MAKING APPROPRIATION FOR THE SUPPORT OF THE NAVY DEPARTMENT AND THE NAVAL SERVICE, THE JUDGE ADVOCATE GENERAL OF THE NAVY IS CORRECT IN THE CONCLUSION REACHED BY HIM IN AN OPINION OF AUGUST 14, 1937, A COPY OF WHICH YOU FORWARDED TO THIS OFFICE, THAT IT IS SUFFICIENT COMPLIANCE WITH THE LAW FOR FUEL OIL TO HAVE BEEN PROCESSED OR MANUFACTURED IN THE UNITED STATES, EVEN THOUGH THE CRUDE OIL MAY HAVE BEEN IMPORTED FROM A FOREIGN COUNTRY.

AS POINTED OUT BY THE JUDGE ADVOCATE GENERAL IN HIS OPINION OF AUGUST 14, 1937, THE ACT APPROVED JUNE 3, 1936 (49 STAT. 1398), AND PUBLIC, NO. 54, SEVENTY-FIFTH CONGRESS, APPROVED APRIL 27, 1937 (50 STAT. 96), IN MAKING APPROPRIATIONS FOR THE NAVY DEPARTMENT AND THE NAVAL SERVICE FOR THE ENSUING FISCAL YEAR SIMILARLY PROVIDED:

* * * THAT NO PART OF THIS APPROPRIATION SHALL BE AVAILABLE, ANY PROVISION IN THIS ACT TO THE CONTRARY NOTWITHSTANDING, FOR THE PURCHASE OF ANY KIND OF FUEL OIL OF FOREIGN PRODUCTION FOR ISSUE, DELIVERY, OR SALE TO SHIPS AT POINTS EITHER IN THE UNITED STATES OR ITS POSSESSIONS WHERE OIL OF THE PRODUCTION OF THE UNITED STATES OR ITS POSSESSIONS MAY BE PROCURABLE, NOTWITHSTANDING THAT OIL OF THE PRODUCTION OF THE UNITED STATES OR ITS POSSESSIONS MAY COST MORE THAN OIL OF FOREIGN PRODUCTION, IF SUCH EXCESS OF COST, IN THE OPINION OF THE SECRETARY OF THE NAVY, WHICH SHALL BE CONCLUSIVE, BE NOT UNREASONABLE.

IN FACT, COMMENCING WITH THE NAVY APPROPRIATION ACT OF FEBRUARY 28, 1931 (46 STAT. 1431, 1442), FOR THE FISCAL YEAR ENDING JUNE 30, 1932, THE USE OF EACH ANNUAL APPROPRIATION FOR THE PURCHASE OF FUEL OIL HAS BEEN SO LIMITED. THE NAVY DEPARTMENT FUEL-OIL SPECIFICATIONS FOR THAT FISCAL YEAR QUOTED THE EXACT TERMS OF THE ACT AND REQUIRED BIDS SUBMITTED ON ANY OTHER BASIS TO SO SPECIFY; I.E., SEE CONTRACT NO. NOS 22117 OF MAY 21, 1931, WITH THE STANDARD OIL CO. OF NEW JERSEY.

THE LIMITATION IN THE ANNUAL APPROPRIATION ACTS HAS SPECIFIC APPLICATION TO THE PURCHASE OF FUEL OIL FOR THE NAVY, AND UNDER THE GENERAL RULE THAT WHERE A SPECIFIC STATUTE IS APPLICABLE THERE MAY NOT BE APPLIED THE TERMS OF A GENERAL STATUTE, THERE IS NOT FOR APPLICATION THE MORE GENERAL TERMS OF THE BUY AMERICAN ACT OF MARCH 3, 1933 (47 STAT. 1520, 1521). THE ABOVE -QUOTED TERMS OF THE ANNUAL APPROPRIATION ACTS ARE UNLIKE THE BUY AMERICAN ACT OF MARCH 3, 1933, IN THAT WHILE THE LATTER ACT REQUIRES PRODUCTS TO BE MANUFACTURED SUBSTANTIALLY ALL FROM MATERIALS MINED OR PRODUCED IN THE UNITED STATES, THE APPROPRIATION ACTS MAKE NO EXCEPTION WHATEVER, AND THIS APPARENTLY FOR THE REASON THAT IT WAS WELL KNOWN THE UNITED STATES HAD LARGE QUANTITIES OF CRUDE OIL FROM WHICH GASOLINE AND FUEL OIL COULD BE MANUFACTURED. DECISIONS INTERPRETING THE ACT OF MARCH 3, 1933, MAY NOT BE CONSIDERED AS CONTROLLING IN INTERPRETING THE DISSIMILAR TERMS OF THE APPROPRIATION ACTS.

THE JUDGE ADVOCATE GENERAL HAS REACHED THE CONCLUSION THAT THE WORDS "PRODUCTION" AND ,MANUFACTURE" HAVE BEEN HELD BY THE COURTS TO BE SYNONYMOUS AND THAT WHEN THE FUEL OIL IS MANUFACTURED IN THE UNITED STATES, EVEN THOUGH FROM FOREIGN CRUDE, THE FINISHED PRODUCT IS A ,PRODUCTION OF THE UNITED STATES OR ITS POSSESSIONS" WITHIN THE MEANING OF THE 1936 AND 1937 APPROPRIATIONS FOR THE SUPPORT OF THE NAVY DEPARTMENT AND THE NAVAL SERVICE.

SUCH CONCLUSION CANNOT BE ACCEPTED AS A CORRECT INTERPRETATION OF THE LAW. THE CRUDE OIL IS THE BASIS OR WHOLE SUBSTANCE OF THE FUEL OIL. THE PROCESSING IS MERELY TO ADAPT TO A PARTICULAR USE WITHOUT MATERIAL CHANGE. THE SUPREME COURT OF THE UNITED STATES HAS REFERRED IN MANY DECISIONS TO THE EXTRACTION OF CRUDE OIL FROM WELLS, ETC., IN THE LAND AS THE PRODUCTION OF OIL. SEE OHIO OIL COMPANY V. INDIANA, 177 U.S. 190; MASON V. UNITED STATES, 260 U.S. 545, 556; MID-NORTHERN OIL COMPANY V. WALKER ET AL., 268 U.S. 45; AND PAN AMERICAN COMPANY V. UNITED STATES, 273 U.S. 456; MAMMOTH OIL COMPANY V. UNITED STATES, 275 U.S. 13, 32, 35, 37, 41, 47; PANAMA REFINING COMPANY V. RYAN, 293 U.S. 388. PROVISION IS MADE IN THE INTERNAL REVENUE LAWS FOR THE DEPRECIATION OF WELLS DUE TO THE PRODUCTION OF OIL AND GAS; THAT IS, THE TAKING OF THE CRUDE PRODUCT FROM THE LAND.

IN VIEW THEREOF IT PROPERLY CANNOT BE CONCLUDED THAT THE PROHIBITION AGAINST THE PURCHASE "OF ANY KIND OF FUEL OIL OF FOREIGN PRODUCTION"-- WHEN THERE MAY BE PROCURABLE AT REASONABLE EXCESS COST FUEL OIL OF THE PRODUCTION OF THE UNITED STATES OR ITS POSSESSIONS--- WAS INTENDED TO BE LIMITED TO THE REFINING PROCESS, HOWEVER SLIGHT, OR TO THE MERE MANUFACTURE IN THE UNITED STATES OF FUEL OIL, EVEN THOUGH SUCH FUEL OIL WAS MADE FROM, OR INCLUDED SUBSTANTIAL AMOUNTS OF FOREIGN CRUDE. THE TERM "PRODUCTION" OF FUEL OIL MUST BE GIVEN THE ORDINARY ACCEPTED MEANING WHICH INCLUDES THE TAKING FROM THE LAND OF THE CRUDE PETROLEUM AS WELL AS THE PROCESS OF REFINEMENT OR LATER MANUFACTURE INTO FUEL OIL, ETC. USES OF THE APPROPRIATIONS MAY BE APPROVED ONLY ON THAT BASIS.